Drought

This story won't get a lot of play but California is running out of water. Arnold has declared a water emergency and has asked us to save water.

http://www.kcra.com/water/18812494/detail.html

The fact that California is running out of water shouldn't be surprising. Southern California is a desert. Palm Springs has about 100 golf courses. My dream is for greening the planet is to really improve desalination technology.



Desalination is ultimately where we will be headed in water technology. Ground springs and aquifers are emptying and will not supply the water we need forever. Unfortunately, as the chart above shows, it is many times more expensive to desalinate water than get fresh groundwater. Desalination should be part of the stimulus plan's green technology initiatives and part of the strategy for a self sustaining (with regards with resource use) world.

Back by popular demand

So blame Xacto, she requested more econ so here it is.

We were chatting and she says, "yeah. ok so let me get this straight.
11:45 AM free trade is controversial b/c it limits blue collar jobs here in the us, but it helps big businesses it helps b/c it creates more markets for exporting goods?"

So a term you should know is "opportunity cost" )http://en.wikipedia.org/wiki/Opportunity_cost) But Opportunity cost essential means that if it takes me an hour to paint a house and you half an hour, and it takes me an hour to build a bike and you two, instead of each of us building our own bikes and painting our own houses; you should paint the houses and I should build the bikes. That way for the same amount of time, we can have more goods. Basically, we can have more goods by specialization.

So in economic terms, each country produces the goods that they can make the cheapest. So they grow corn in Missouri (I've driven through Missouri, believe me, there is A LOT of corn) and they grow sugar in the Barbados because the climates of each region are best suited to grow those particular crops. So imagine that to get a ton of corn from Missouri, it takes 4 man hours and 4 hours of tilling the fields. But if you want a ton of corn from the Barbados, because its not ideally suited for growing corn, it takes more man hours and more hours of tilling to get the same amount of corn. Well you can use less people to get the same amount of goods, you can make it cheaper and make more of it.

So essentially we want the world to operate like this. We dont want Missouri to have to grow corn, sugar, build cars, build computers, and build Christmas tree ornaments. We want them to concentrate on corn because they're the best at producing it and they can make the most for the cheapest.

So when there are tariffs, it encourages countries to be less efficient with their resources. Say China can make a stick of gum for a dollar and Missouri can make it for 2; but a tariff makes the Chinese gum cost 2.5 dollars, Americans will buy the American product and an American has a job but theres a cost. So the American consumer used to be able to buy gum for 1 dollar, now has to pay 2 meaning they have less money to spend elsewhere. The inefficient labor hours it took to make the gum could have been used to to make something America is actually good at producing.

So the key to preventing a situation where America is importing everything and not exporting enough is America needs to find more things its the best at producing. The best way to advance our advantage is improved the collective skills and education of our workforce and gain advantages in white collar industries because we already have the best network of institutions of higher educations and other countries can produce shoelaces more cheaply than Americans can.

So back to original question, companies and consumers should both like free trade. Consumers buy goods at the best possible world price, companies who are the best at producing goods like it because they get to compete on the open market without the government raising prices and perhaps making a product that was the best AND the cheapest more expensive than the local product (like American Automobiles.)

Econ!! Just kidding, Baseball

Math is invading the baseball world these days and really having and effect on how we quantify the talent of the players and teams. Smarter people than I have done studies to see which offensive stats best correlate to runs and which pitching and defense stats correlate to fewer runs allowed. And once you find the projected runs for, and runs against, the point differential will give you a projected W-L record.

Introducing PECOTA- It stands for Player Empirical Comparison and Optimization Test Algorithm and it is consistently one of the most accurate projections on the web. It projects player stats by looking at the players history and then finding what players with comparable stats at the same age and looks for trends.

So for all of you with favorite baseball teams, here is a pretty good projection of where they might finish.

http://www.baseballprospectus.com/fantasy/dc/index.php?sessionstatus=notloggedin

More economics (a lot more)

The mayor of Detroit wrote a stirring article for CNN about how free trade is to blame for the current economic crisis.

http://www.cnn.com/2009/POLITICS/02/09/am.bernero.trade.reform/index.html?eref=rss_topstories

Free trade has become a punching bag for people who want to blame someone for the recession we are in and why people are losing their jobs. Here are a few choice quotes from the article that I want to explore.

"...the unholy alliance between Washington and Wall Street has sold out the American worker and exported our standard of living."

This statement makes no sense to me. Unholy alliance? Are Wall Street and Washington having meetings in underground lairs where they plot the demise of the average American?

Exported our standard of living? I have no joke or snarky comment. What the hell does this mean?

He goes on to say...

Driven by the insatiable greed of Wall Street profiteers and accelerated by the false promise of free trade, our manufacturing base has been chased out of this country and along with it the livelihood of millions of hard-working Americans."


First off, why do people even form companies? This is not the first time Wall Street has been called our for "greed." Do you people form companies and go to work every day for any reason other than to make money? Do people go to work instead of the beach every day because its fun? Does getting a job on Wall Street turn you into a soulless subhuman who lives for other people's misery?

People who work on wall street are men and women with kids and mortgages too and they probably worry about losing their job once and a while too. But Bernero is attacking the CEOs and "fat cats" of wall street.

Bernero is playing off the fact that wall street is a target for lower and middle class Americans who see newspaper headlines of 20 million dollar bonuses, chartered jets, and luxury yachts for the CEOs as proof that the economic system that allows some families to squeeze into one bedroom apartments as broken.

I'll be the first to say, if there was a way to efficiently and fairly redistribute wealth, I would be for it. It sucks seeing people go hungry or without heat in the middle of a Detroit winter.

Let’s look at why corporations offer these kinds of compensation packages. Here I'll turn to major league baseball to provide the analogy. Why does Alex Rodriguez make more money than David Eckstein? Easy, because one is a better player. People who run companies (like baseball teams) know exactly how much skill is worth to their company and are willing to pay an employee more if he brings more value back to the company.

Why does Alex Rodriguez make more money than I do? The answer is simply he has a marketable skill that I don't have (or have very little of). Not everyone has the skill and acumen to run a huge company. The shareholders of these companies that need to hire someone to manage thousands of people and billions of dollars worth of assets and want to hire the very best managers and CEOs that they can. And if the difference between a good CEO versus a bad CEO can be the difference between a successful company and bankruptcy, a 20 million dollar bonus is bargain to pay to acquire the smartest person they can. And if a good CEO can be the difference between life and death for a company, why is it so outrageous to reward the person with compensation equal to the value that they brought to the company?

Now, your next logical question to my argument is, “But these companies failed and need corporate bailouts, they don’t deserve the massive compensation they’re receiving.” And America has a couple logical choices for how to deal with this issue for the companies they are bailing out. One is, if America becomes the primary owner of a company, they can fire the old CEO and bring in a new one and pay him whatever Obama wants. But we’re back at the dilemma I brought up earlier, if you are a talented CEO and could work anywhere you want, are you going to work for a bailed out company that has a restriction on executive pay or are you going to take your services to the highest bidder? Executive pay caps are not a good idea if you think that a talented head of the company is very important. So if the government is going to force the old CEO out and force the company to hire a new one with strict earning limits they’re going to have to prepare to hire someone who is inexperienced and will be willing to work for smaller earnings.


Bernero continues,
“With all due respect, the free traders need to ask themselves a more fundamental question: how will Americans buy those goods when they don't even have a paycheck that covers their mortgage, much less the college tuition for their children.”

My first question to Bernero is, “If all these kids are going to go to college and aren’t interested in working blue collar jobs, why are you so concerned that these jobs are going away?” I just graduated from college and I will be the first to tell you that I wanted a white collar job. If I had been offered an assembly line job for a car manufacturer, I would have turned it down.”

The next major point Bernero makes is, “those who continue to espouse free trade ominously warn that protectionism is the wrong path for our nation; that challenging the holy doctrine of free trade invites a global trade war. Yet we already face rampant protectionism across the globe. Pursuing a free trade agenda in a protectionist world is tantamount to unilateral disarmament. Our trading partners routinely employ taxes, tariffs and subsidies that underwrite their exports and restrict American products from entering their home markets. They use currency manipulation to reduce the relative cost of their goods here in the USA.”

Here are the list of countries that America trades with most. And not shockingly, America does more business with countries that have free trade agreements. So the plan in this economy is to buy and sell fewer goods with the rest of the world?

Top 10 Countries for U.S. Exports (2005)
1. Canada ... US$211.9 billion (up 31.7% from 2002)
2. Mexico ... $120.4 billion (up 23.5%)
3. Japan ... $55.5 billion (up 7.8%)
4. China ... $41.9 billion (up 89.6%)
5. United Kingdom ...$38.6 billion (up 16.3%)
6. Germany ... $34.2 billion (up 28.6%)
7. South Korea ... $27.8 billion (up 23%)
8. Netherlands ... $26.5 billion (up 44.8%)
9. France ... $22.4 billion (up 17.9%)
10. Taiwan ... $22.1 billion (up 20.1%)

The top 4 trade partners for American exports - Canada, Mexico, Japan and China - consumed over 47% of U.S. exports in 2005.

Top 10 Countries U.S. Imports From (2005)
1. Canada ... US$290.4 billion (up 38.9% from 2002)
2. China ... $243.5 billion (up 94.5%)
3. Mexico ... $170.1 billion (up 26.4%)
4. Japan ... $138 billion (up 13.7%)
5. Germany ...$84.8 billion (up 35.7%)
6. United Kingdom ... $51 billion (up 25.3%)
7. South Korea ... $43.8 billion (up 23%)
8. Taiwan ... $34.8 billion (up 8.4%)
9. Venezuela ... $34 billion (up 125.2%)
10. France ... $33.8 billion (up 19.9%)

This list makes his point about it being a protectionist world a flat out lie. We have NAFTA (North American Free Trade Agreement) which guarantees free trade with Mexico and Canada, America’s 2 biggest trading partners. America has negotiated free trade agreements (or near free trade agreements) with (I believe) everyone on these lists (although I couldn’t find any articles saying one way or the other about all of them and I didn’t want to spend the time looking for them).

Bernero comes off very much as someone who hasn’t bothered to concern himself with finding out why the economy is in trouble. This looks like a campaign speech to me. Yes, wall street made some mistakes. Yes, these car companies made some mistakes, but the economy fluctuates naturally and does so with predictable regularity. Yes, this recession is worse than most, but this is what happens every single time and we're acting like its our first recession ever.

My real question is, why are we in a such a huge rush to bail out companies that frankly don’t make a very good product? My family bought 2 cars in the 90’s. A Chevy Suburban in 1995 and a Toyota Camry in 1996. We sold the Chevy after it stopped running yet again to a friend who like to tinker with cars in 2002 with barely 100,000 miles on it but well over 10,000 in repair bills. Its 2009 and I still drive the Camry we bought in 1996 and the biggest problem I’ve ever had with it is I pulled off the door handle and the trunk lever. It has 130,000 miles on it and still purrs like a kitten. I will never buy an American car unless the reputation for quality improves drastically. Yes, I realize the American car company employs a lot of hard working, decent, insert positive adjective here, Americans. But if the company makes a crappy product, it deserves to go out of business. American car companies have been losing there market share of the car market in America for years now. They weren't good healthy companies that were just knocked on their ass by this recession in the last year, they have been losing customers for decades now. The patriotism of buying an American car does not make up for it when you're going bankrupt paying repair bills.

And although Bernero says manufacturing can’t survive in America without protection, car makers like Toyota and Nissan are building factories in America because more people want their product. GM and Ford are building factories overseas complain that they can't compete so they build their factories overseas.

My point is, yes it sucks that people are losing their jobs and can’t pay their mortgage. But natural capitalism is the best system we have. If America wants to continue to be a manufacturer, its going to have to have even better quality than the factories that use cheap labor because the products are going to cost more. The best strategy for America is to churn out the best and brightest minds and instead of exporting products made of iron and steel, export the fruits of our knowledge by becoming a leader in green technology the next product market that is primed for explosion, while continuing to be a leader in pharmaceuticals and the services sector.

If you made it all the way to the bottom, I thank you. I had rebuttals to other points in the article but at this point, I'm tired. I'll try to cut back on the econ posts and get back the bread and butter of this blog, complaining about the people who hate gay people.

Best Picture ever

Where the fuck are the zeros on this Hundred? Wait, is this what i think it is?!?!?!

I haven't seen one of these in years.

Obama and Autos

Obama, if you want to lose my support for your presidency here is how: Protectionism for the US automakers.

http://abcnews.go.com/International/story?id=6793284&page=1

"Washington is planning billions in subsidies for the ailing automobile industry, and the US Senate is debating a 'Buy American' provision in its economic stimulus package..."

What this essentially means is that the US will tax the Japanese and German car makers which would make their cars more expensive and therefore lower the demand for their product.

Say comparable American and Japanese cars each cost $10,000. So under a protectionist policy (tariff), a $2,000 tax would be placed on imported cars raising their cost to consumers to 12,000. It would be nice if the American companies would start selling their cars and eventually start making money and paying the taxpayers back for our substantial investment in them. Instead, American car companies raise their prices to $11,500 because why would they continue to sell a product for 10,000 when they could raise their prices and still be the cheapest option. Meanwhile because they're being protected and aren't facing real competition, they have no incentive to improve the quality of their cars. Meanwhile because there are no cars that cost less than 11,500 on the market, consumers buy less cars because they can't afford them further stagnating the economy.

THIS WOULD NOT HELP THE ECONOMY, IT WOULD ONLY MAKE IT WORSE.

I did some checking and America tried this in the 70's. Here is a long article that you probably won't read but talks about America's protectionist efforts for the car company in the 70's and how it didn't work then either.

http://www.eastasiaforum.org/2008/11/29/1970s-deja-vu-creeping-protectionism-is-on-the-rise/

Don't take my word for it that this would be a terrible idea. (From Wikipedia's page on protectionism) "Economics Nobel prize winner and trade theorist Paul Krugman once stated that, "If there were an Economist’s Creed, it would surely contain the affirmations 'I believe in the Principle of Comparative Advantage' and 'I believe in Free Trade'."

Obama, you seem like a smart guy. And I know you made some promises to all the people in Detroit who are losing their jobs, but this will not solve anything.